PJM Interconnection operates the largest wholesale electricity market in North America, coordinating power flows across 13 states and Washington D.C. for 65 million customers. This regional transmission organization (RTO) has become a critical institution in America’s energy landscape, balancing competing demands for reliability, affordability, and sustainability in one of the world’s most complex power systems.
Origins of PJM and the modern grid
The origins of PJM date back to 1927 when utilities in Pennsylvania, New Jersey, and Maryland formed an interconnection to share reserve power. This cooperative approach represented a radical departure from the era’s standard practice where each utility operated as an isolated monopoly. The early interconnection helped prevent blackouts by allowing members to back each other up during emergencies, while reducing costs through shared resources.
As the electric grid grew more interconnected throughout the 20th century, the need for centralized coordination became apparent. The Northeast Blackout of 1965 – which left 30 million people without power – demonstrated the vulnerabilities of fragmented grid operations. This catalyzed support for stronger regional coordination, leading to PJM’s evolution into an independent system operator in the 1990s following federal electricity market reforms.
PJM Today
Today, PJM operates at the center of a sophisticated energy ecosystem. The organization performs two vital functions that keep lights on across its territory. First, as a grid operator, PJM engineers constantly balance electricity supply and demand in real-time, dispatching power plants every five minutes to match the second-by-second fluctuations in consumption. This complex dance maintains the grid’s critical 60Hz frequency within tight tolerances.
It’s important to note that PJM does not own the power plants that generate the electricity; they are owned by a diverse mix of entities, from the New Deal era Tennessee Valley Authority (TVA) to Talen Energy in Maryland. For example, New Jersey’s last remaining nuclear facility – Salem/Hope Creek Generating Station – is owned and operated by PSEG in partnership with Excelon. What power generating stations get built where and what type they are (coal, nuclear, natural gas, wind, solar, etc…) are subject to local, state, and federal authorities and state energy policies like New Jersey’s Energy Master Plan. Currently, about 30-35% of power generated within the PJM grid is from nuclear, 50-55% from natural gas, 10-15% coal, ~5-8% from renewables (wind, solar, and hydro), and less than 2% from oil and battery storage.
Caption: Hope Creek Nuclear Generating Station is owned by PSEG/Excelon. The electricity it generates is distributed via the PJM grid
Second, as market administrator, PJM runs competitive auctions that determine electricity prices and compensate generators. The energy market matches supply with demand on an hourly basis, while the separate capacity market ensures adequate generation resources will be available in future years. PJM also operates markets for ancillary services that provide voltage support and other grid stability functions.
The transition to competitive markets in the late 1990s transformed PJM from a utility cooperative into an independent system operator. This restructuring introduced market-based pricing that rewarded efficiency and innovation. Where monopoly utilities once received guaranteed returns on their investments, generators in PJM’s markets now compete to provide electricity at the lowest cost.
For more about how the grid operates, watch “The Power Behind the Switch”
Growing Challenges
However, PJM faces growing challenges as the energy landscape evolves. The rapid growth of renewable energy presents both opportunities and complications. While wind and solar provide clean electricity, their intermittent nature requires new approaches to grid management. PJM must coordinate thousands of distributed energy resources while maintaining reliability as traditional coal and nuclear plants retire.
Market design has become another flashpoint. State clean energy policies sometimes conflict with PJM’s federally-regulated wholesale markets. When states subsidize preferred generation resources like nuclear plants or offshore wind, it can distort price signals in PJM’s competitive markets. These tensions have led to protracted legal and regulatory battles over market rules.
Infrastructure represents another pressing challenge. Much of PJM’s transmission system was built decades ago and requires upgrades to handle new power flows. Building new lines faces opposition from landowners and local communities, while cybersecurity threats grow as grid operations become more digitally connected.
Perhaps most significantly, electricity demand is surging after years of flat growth. Data centers, electric vehicles, and industrial electrification are driving projections of 4.5% annual load growth in PJM territory – a dramatic increase that will require new generation and transmission investments. This comes as the industry struggles with supply chain delays and workforce shortages.
Looking ahead, PJM must navigate these challenges while maintaining its core mission of reliable, affordable electricity. The organization’s ability to adapt will help determine whether the eastern U.S. can successfully transition to a clean energy future without compromising grid reliability. PJM’s decisions over the coming decade will shape the region’s energy landscape for generations to come.
References
Brattle Group. (2023). “Resource adequacy in transition: Challenges for PJM’s capacity market”. https://www.brattle.com
Federal Energy Regulatory Commission. (1999). “Order No. 2000: Regional transmission organizations”. https://www.ferc.gov
North American Electric Reliability Corporation. (2023). “Long-term reliability assessment”. https://www.nerc.com
PJM Interconnection. (2023). “The PJM story: A history of innovation”. https://www.pjm.com
Princeton University Zero Lab. (2023). “Decarbonization pathways for PJM”. https://zero.princeton.edu
U.S. Energy Information Administration. (2024). “Electric Power Monthly”. https://www.eia.gov
